Facts of the Case

The petitioner, Urmila Thumu, was a registered taxable person engaged in the business of providing courier services. The GST authorities issued a show cause notice alleging continuous non-filing of GST returns for six months and proposed cancellation of the petitioner's GST registration under Section 29 of the Central Goods and Services Tax Act, 2017.

The petitioner submitted a reply to the show cause notice. However, the Proper Officer proceeded to cancel the GST registration by order dated 15.12.2021. Aggrieved by the cancellation, the petitioner preferred a statutory appeal. The Appellate Authority dismissed the appeal on 19.08.2022 by observing that the petitioner's request did not appear to be genuine.

The petitioner thereafter approached the Telangana High Court challenging both the cancellation order and the appellate order.

 

Issues Involved

  1. Whether cancellation of GST registration under Section 29 of the CGST Act without proper consideration of the taxpayer's reply was legally sustainable.
  2. Whether the appellate authority was justified in rejecting the appeal without granting effective relief.
  3. Whether the matter deserved to be remanded for fresh adjudication in accordance with the principles of natural justice.

 

Petitioner’s Arguments

  • The cancellation order was passed arbitrarily despite submission of a reply to the show cause notice.
  • The cancellation was contrary to the provisions of the CGST Act and violated the principles of natural justice.
  • The appellate authority failed to properly examine the facts and mechanically dismissed the appeal.
  • The petitioner sought restoration of GST registration and permission to file pending GST returns for the intervening period.

 

Respondent’s Arguments

  • The GST authorities contended that the petitioner had continuously failed to furnish GST returns for the prescribed period.
  • The cancellation of registration was therefore justified under Section 29 of the CGST Act.
  • The Appellate Authority maintained that the petitioner's request did not appear genuine and accordingly rejected the appeal.

 

Court Findings / Order

The Telangana High Court observed that the issue was no longer res integra and had already been settled in earlier decisions, particularly:

  • M/s. Chenna Krishnama Charyulu Karampudi vs Additional Commissioner (Appeals) – 2022 (7) TMI 82
  • Nithya Constructions vs Union of India – 2022 (7) TMI 186

Following the above precedents, the Court held that similar matters should be remanded to the Proper Officer for fresh adjudication after providing adequate opportunity of hearing.

Accordingly, the High Court:

  • Set aside the cancellation order dated 15.12.2021.
  • Set aside the appellate order dated 19.08.2022.
  • Remanded the matter to the Proper Officer for fresh consideration.
  • Directed the Proper Officer to hear the petitioner afresh and pass an appropriate order in accordance with law.
  • Directed that the exercise be completed within four weeks from receipt of the Court's order.
  • Disposed of the writ petition without costs.

 

Important Clarification

This judgment reiterates that GST registration cannot be cancelled in a mechanical manner. Even where returns remain pending, the Proper Officer must comply with the principles of natural justice by properly considering the taxpayer's reply and granting an effective opportunity of hearing. Where such safeguards are absent, the High Court may set aside the cancellation and remand the matter for fresh adjudication.

 

Sections Involved

  • Section 29 – Cancellation or Suspension of Registration – Central Goods and Services Tax Act, 2017
  • Article 226 – Constitution of India
  • Article 19(1)(g) – Constitution of India
  • Article 21 – Constitution of India
  • Section 107 – Appeals to Appellate Authority under the CGST Act, 2017 

Link to download the order -https://www.mytaxexpert.co.in/uploads/1782889806_157compressed.pdf

 

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